EconPapers    
Economics at your fingertips  
 

Transition and capital misallocation: the Chinese case

Damien Cubizol

Journal of International Money and Finance, 2018, vol. 81, issue C, 88-115

Abstract: This paper demonstrates that the allocation of household savings to State-Owned Enterprises (SOEs) in China, and not to the increasing share of private firms, explains a part of the drop in the consumption share and of the patterns of capital flows during China’s transition. The contribution is to explain these two elements in a dynamic general equilibrium model with TFP growth that differentiates FDI and foreign assets. In addition to other frictions, financial intermediation and SOEs have the crucial role by misdirecting household savings. It modifies firms’ labor and capital intensiveness, and creates shifts in savings accumulation and capital flows. Moreover, the increasing share of credit-constrained private firms hinders wage growth, and returns on household savings are low to finance SOEs; these two elements reduce the consumption share. With a calibration adapted to the Chinese economy and deterministic shocks, the model also matches to a large extent the data for a variety of stylized facts during China’s transition.

Keywords: China’s transition; Foreign assets; FDI; Consumption; Global imbalances; Factor market distortions (search for similar items in EconPapers)
JEL-codes: E20 F21 F32 O40 P20 P30 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S026156061730164X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:81:y:2018:i:c:p:88-115

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-05-10
Handle: RePEc:eee:jimfin:v:81:y:2018:i:c:p:88-115